In the wake of the Monetary Policy Committee (MPC) meeting that was conducted by the Central Bank of Nigeria, The CBN concluded by announcing removal of naira peg at 197 to the dollar.
Recall that the recent fuel crises that flooded the nation within the first quarter of the year was solely attributed to unavailability of forex by Major oil marketers in the country.
Since the beginning of President Muhammadu Buhari’s Administration, the president in the company of his technocrats have been trying to exploit every avenue to strengthen naira. The Buhari administration has established new forex policy, repatriation of looted funds to further emboss the downstream oil sector; also his administration introduced the latest price regime for Premium Motor Spirit.
The following moves have been made by the federal government to strengthen the currency; all of which have proofed abortive.
New Forex Policy/ Sudden Availability of Forex For Oil Marketers
At the end of 2015, The Federal government and CBN decided to squash the forex allocation for students studying abroad as well as oil marketers who imports petroleum products. Buhari said the country could no longer continue to sell dollars to parents to sponsor their wards in schools abroad. The decision led to hoarding and Hike in petroleum price. Not more than 6 weeks the federal government made a U-turn and decided to provide forex for oil marketers.
Yuan Swap Deal With China
Earlier in April, Buhari visited china to negotiate a deal worth $6 billion, the Yuan swap deal was a desperate move by Buhari to shore up the naira which continues to lose to against greenback (dollar). The deal would see Nigeria as China’s the business hub in Africa. CBN immediately said the deal was part of its plans to diversify its foreign exchange reserves away from the dollar by switching a stockpile into Yuan. The Yuan swap would make the demand for dollar lesser and subsequently divert importers’ attention towards china.
However the demand for dollar continues to rise since the deal was announced.
CBN Removes Peg on Official Naira-Dollar Exchange Rate
CBN once again decided to go back to the drawing table for ideas on how to help the dieing naira.
This time at its MPC meeting in the capital, Abuja, Governor Emefiele Announced that the removal of naira peg to the dollar (which was 197/$) in favour of a flexible currency regime. The policy again was a U-turn designed to boost local manufacturing and exports and stave off a recession.
It seems FG and CBN are not confident of the policy (mistakes) they enforce. President Buhari ad his technocrats needs to stop experimenting with Nigeria’s economy, the citizens voted for a man whom they thought had proper plans to restore the economy.
President Buhari’s decision so far has proved abortive as many Finance experts believe naira devaluation is imminent.
Written By Enisan Daniel